Embracing The Internet

Systems integrator Phil Telesco wants to be the single source of point of sale (POS) hardware and software for his customers. The Internet, however, could threaten Telesco's livelihood. On the other hand, it could give his company, Addcash Systems, Inc., just the boost it needs.

Located in Burlingame, CA outside of San Francisco, Addcash Systems provides POS hardware and software to specialty retailers. Telesco's customers include golf, apparel, luggage, and gift stores. He sells to independents and also to chains with headquarters in the area. Addcash Systems has 12 employees and projects 1999 gross revenues of $2.6 million.

The Internet: A Double-Edged Sword
"I can't fight the Internet trend," says Telesco, president of Addcash Systems, Inc. The trend he refers to is the growing number of end users who research POS hardware online. "Smaller end users - those who don't have the time or the manpower to source equipment themselves - will still rely on VARs for POS hardware," notes Telesco. What disturbs him is the fact that many distributors unwittingly compete with their VARs for end user business. Of course, there is little to prevent VARs from setting up shop online to act as distributors. "You don't have to be a stocking distributor," says Telesco. "You can simply buy the products and ship them. To be profitable, you'd have to deal in large volumes. How do you do that on the Internet? Which search engines are important for reaching your target audience? It's just not a direction I want my company to go," says Telesco. Over time, Telesco predicts that companies reselling POS hardware online will consolidate, resulting in some very large VARs/distributors.

Is there a bright side to the Internet? "The number of leads - qualified leads - that we get every month via the Internet is increasing," notes Telesco. "We link to our software vendor's site as well." He attributes the qualified leads to the fact that end users are becoming more educated about POS products by using the Internet. "Customers come to us with an idea of what they want," says Telesco. "A Web-presence can be more cost-effective than cold calling and mailings. However, because end users can buy many POS hardware and software products directly from vendors online, they are very aware of prices. If my prices are out of line from those on the Internet, I could lose business."

Capitalizing On E-Commerce
"I am very excited about integrating Web-based e-commerce with store-based systems," states Telesco. "Many retailers want to expand on the Internet, but navigating the e-commerce minefield can be too big a project." The "minefield" includes finding and integrating POS software, including inventory control, back-office, order picking, shipping, and invoicing. "The e-commerce market is in its infancy, and very few integrators can provide an end-to-end solution," adds Telesco. "Several of my customers have tried to do it piecemeal, and it doesn't always work well." According to Telesco, one key to a good e-commerce solution is integrating it into the retailers' in-store operations. All the sales, whether online or in the store, need to come from the same inventory, for example.

Not all retailers use the Internet for sales. One example is Telesco's customer, Pure Beauty. "These beauty supply stores have lines of product that cannot be sold online, per the manufacturers," says Telesco. "Pure Beauty uses its Web site as a marketing tool to drive traffic into its five stores."

Conversely, Don Sherwood Golf and Tennis uses the Internet for both sales and marketing. While the Web site drives traffic into its stores, it also increases sales from online shoppers. "The golf industry does very well when it comes to Internet sales," notes Telesco. "For an investment of $30,000 to $60,000 for e-commerce hardware and software, a store can realize sales of $2 million a year."

Outsourcing Web Site Development
Although Telesco wants to be a one-stop shop for his customers, he's quick to realize when outsourcing makes sense. "The company runs lean," says Telesco. "I don't want to lay off anybody. We work overtime when we are very busy with installations." As a result of running lean, Telesco does not have the staff to develop his retail customers' Web sites. "A good Web site developer is technically proficient as well as artistic. Web site design for online shopping is important. It has to be easy for the customers to navigate." Outsourcing Web site development is not difficult to do in the San Francisco area. "Our unemployment rate is around 3% or less," says Telesco.

The Internet Speeds Retailer Reports
The Internet is also impacting retailers' in-store operations. "Instead of sending sales data from branch stores to headquarters via modem, we can do it using the Internet," says Telesco. "The information is close to real time. Instead of PCs in the stores, retailers would use display terminals without processing ability (dumb terminals). It may not be a feasible solution for smaller retailers, but it seems to be the direction in which the industry is moving."

And where is Telesco headed? "Y2K has kept us extremely busy this year," he admits. One thing he'd like to do is take a long vacation in early spring 2000. Telesco plans on using his mini-sabbatical, in part, to gain a better understanding of the POS industry. "I've been in the industry for 12 years. It's time to get away. If not, I'm afraid I'll lose my perspective."

Given Telesco's enthusiasm for the Internet and all its possibilities, losing his perspective doesn't seem possible.